The Irish Times view on budget planning: Dangers on the horizon

It would be wrong to squander all of the progress made since the crash in a give-away budget

Now that the abortion referendum is out of the way politicians are turning their attention to the shape of the next budget. Minister for Finance Paschal Donohoe has been trying for some time to manage expectations and his approach received a significant endorsement in a report this week from the Fiscal Advisory Council.

The council's insistence on the need for prudence received an encouraging welcome from Fianna Fáil finance spokesman Michael McGrath. He accepted that the Irish economy is facing risks and he urged the establishment of a "rainy day" fund.

Brexit is the most obvious risk facing the economy in the period ahead but it is far from being the only one. The trade war launched by US president Donald Trump is another, while the direction taken by the populist government in Italy could put other risks in the shade if it leads to a new crisis of confidence in the Euro.

The Fiscal Council also pointed to domestic risks, with chairman Seamus Coffey warning that faster-than-assumed growth in housing output, while needed, could prompt overheating pressures. He suggested that if construction generates significantly increased tax revenues the funds should be used to build buffers either through additional "rainy day" fund contributions, or through faster debt reduction.


The Irish economy has performed extremely well over the past few years as a result of courageous political decisions taken during the financial crisis. While the public would naturally like to see this translated into improved living standards it would be wrong to squander all of the progress made since the crash in a give-away budget. It appears that Donohoe and McGrath both recognise this. Despite the economic recovery, this country has a substantial hangover of debt so a sudden international downturn could have devastating consequences. This does not mean that progress cannot be made in dealing with serious social issues like the housing crisis and the continuing demands of the health service but difficult choices will have to be made in the allocation of resources.

Some €2.5 billion has already been allocated for extra spending next year so the scope for further initiatives in Budget 2019 is limited. There is potential for a more generous budget package if the Government decides to implement new revenue-raising measures to pay for either increased spending or cuts in tax.

For instance, a decision to tax diesel at the same rate as petrol would generate another €500 million in revenue. While the Government has shown no inclination to do this, there are strong public health grounds for abolishing the incentive to use diesel cars, never mind the extra revenue such a move would generate.